Shekar Natarajan not only foresees the future of supply chain management, he is helping to shape it by finding new and revolutionary ways to apply technology to solve business challenges.
Contributing Editor Toby Gooley is a freelance writer and editor specializing in supply chain, logistics, material handling, and international trade. She previously was Editor at CSCMP's Supply Chain Quarterly. and Senior Editor of SCQ's sister publication, DC VELOCITY. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
If, in the future, a drone is taking inventory in your warehouse, autonomous robots are delivering groceries to your customers' kitchens, or you're delivering products to consumers before they even realize they need them, you might be taking advantage of innovations conceived and developed by Chandrashekar (Shekar) Natarajan and the teams of forward-thinking supply chain and engineering professionals he has led over the past 15 years.
Currently, Natarajan is focusing on finding new ways to apply technology to solve business challenges and revolutionize how supply chains serve consumers. He recently spoke with CSCMP's Supply Chain Quarterly about the future of supply chain technology, and how supply chain professionals can prepare themselves and their companies to succeed in a constantly changing world.
NAME: Chandrashekar (Shekar) Natarajan TITLE: Business scientist and operations executive EDUCATION: Bachelor of Science in mechanical engineering, Jawaharlal Nehru Technological University; Master of Science in industrial engineering, Georgia Institute of Technology; executive certificate, Massachusetts Institute of Technology (MIT) Center for Transportation and Logistics; Advanced Management degree, Harvard Business School EXPERIENCE: Strategic supply chain management positions at Coca-Cola Bottling Company, Alliance Rubber Company, PepsiCo, Anheuser Busch; and executive leadership roles at The Walt Disney Company, Walmart Inc., and Target Corporation RECOGNITIONS: CSCMP Supply Chain Innovation Award; DC Velocity Rainmaker; Global Supply Chain Review "Top 25 Supply Chain Executives"; Consumer Goods Technology top visionaries of the year; Institute of Industrial Engineers Medallion; Supply & Demand Chain Executive Next-generation Thought Leader; Logistics Insights Asia Thought Leader; Times Now television "Non-resident Indians of the Year" (Professional category).
You advocate encouraging "productivity of the mind" in supply chain organizations. What do you mean by that, and why is it important? Productivity of thinking is something you can actually measure as the ability to have situational awareness and react very quickly. People often address problems with mundane solutions if they don't have a structured way of thinking about them. If you have a framework for thinking about problems it drives you to consider both the obvious and the non-obvious. This should increase situational awareness—anticipating what will happen before it happens and pre-positioning responses ahead of time.
Businesses today are evolving rapidly. The primary axes of change include time, networks, networks of networks, relationships with our customers, and the use of data in real time. And all of these are changing asynchronously. To take advantage of these changes, navigate them, and deal with threats, the productivity of our thinking must increase dramatically. We need to incorporate and implement our people's ideas and realign ourselves very quickly.
One way to do that is to think through more than one solution to a problem. What was contextually right at one point in time may be completely wrong two years later. If you have "A to B" and "B to A" scenarios you will be better prepared for change. You will know how to respond because you have already thought through two opposite solutions for that scenario. When you have determined the right approach, you will have strategic options ready to execute. In this way you can accelerate organizational change.
Another is to have all employees see themselves as a potential provider of personalized service; when that happens, hyperlocal opportunities quickly emerge. For example, an employee might deliver a package for a customer on the way home; another might offer a painting service for a customer who is apprehensive about doing the painting.
When you were in the beverage industry, you were instrumental in improving product handling equipment and processes. Tell us about one solution that continues to have a significant impact. At Coca-Cola Bottling Company we developed the CooLift beverage-delivery system, which is now a standard throughout the industry. The specially designed carts and pallets make the job of moving beverages from truck to store much quicker, safer, and more efficient. We developed the solution by looking for a merchandising delivery system that reduced the risk of injury and could be used easily by anyone. We analyzed the whole supply chain as a system, deconstructed it, and identified where and how we could improve it.
When I was with PepsiCo, the same "system" approach led to a host of other innovations, including geo-based delivery, automation of the manufacturing-to-merchandising processes, building orders like Lego bricks so they could be merchandised in minutes versus hours, centralizing and automating routing and dispatching, implementing reputational integrity systems to manage bad actors, and virtual control towers to handle the order flow on an exception basis. In this way, every one of our cumbersome processes got a facelift. As a result, we were able to launch several billion-dollar brands and simplify the work of thousands of field associates. I am grateful to the teams that enabled this and the executives who inspired us to think this way.
Your name is on some 300 patents. What are some of the areas you've focused on? My purpose in filing patents has been to support and protect my employer's business with respect to the future of logistics and commerce. Some of the subject areas that emerged in the past few years include autonomous vehicles—air, ground, on the road, and in the home; the last 100 feet into a consumer's home and in the kitchen; cognitive commerce, where data collection and analysis allows me to know you so well that even before you need something I will get it to you, which leapfrogs search altogether; just-in-time replenishment to the home according to values, affinities, and preferences held in the cloud, which obviates the need for ordering or in-home inventory; and hyperspectral imaging, which gauges a food product's internal qualities, and blockchains to ensure food safety and freshness.
Some others include temperature control and Internet of Things (IoT) systems that enable virtual control towers; engaging customers with virtual reality and augmented reality; virtual malls and the monetization of virtual space; moving "digital duplex" conversations with inanimate objects that are coded with information from the point of purchase to engage the consumer at the point of consumption; personalized business-to-person products, services, and communications; emotive and psychological measurement systems that can adapt the selling process to each customer in real time; algorithms that power gamified virtual planning towers; and continuous dynamic reconfiguration of the supply chain so that it is always optimized.
All of these have an underlying systemic implication for the supply chain's architecture and for the dynamic response networks that need to be created to enable them.
How do you go about determining which technologies are important and where to apply them? The jobs that must be done in commerce and logistics don't fundamentally change. Customers will always want to buy clothes, and we will always have to complete a financial transaction and provide the goods, for instance. But evolving technologies can overcome resource constraints, provide step-change cost advantages, and give us new opportunities to delight the customer. So, I look at the jobs we need to do and map to them the relevant technologies to create a framework of opportunities. As an example, if a package of pretzels can "talk" digitally to the customer and engage in the process of cooking, suddenly the concept of food logistics and brand packaging looks very different. New value gets unlocked for customers and brand companies.
Here's another example: When they are choosing clothes, customers are regularly at the mercy of the sizes and colors that are already available. The technology exists that would allow a customer to choose the style, fabric, size, color, and other options for the garment to be made to order and shipped out overnight. Then the customer could have exactly what he or she wanted each time without the risk of the size or preferred color being out of stock.
Any predictions about what will be the hot areas for supply chain in the next 5 to 10 years? Yes, I think the following areas will be most important:
The Internet of Things will enable full visibility of the supply chain from factory to customer.
Blockchains will enable track and trace and will limit the influence of bad actors.
Logistics services will become available as Logistics as a Service (LaaS), where a third party provides platform-based turnkey solutions for end-to-end processes.
"Frenemy networks" will include competitors in a service offering.
Every supply chain job will change due to digitization, through such means as apps, advanced analytics, and cloud computing power.
"Networks of networks" will develop through the constant realignment of networks with new partners to enable value delivery.
We will see highly personalized business-to-individual (B2i) communications and commerce.
Robots and autonomous vehicles will play an increasingly significant role.
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Why is know-how about emerging sciences critical to businesses in general, and supply chain organizations in particular? How will the roles of supply chain professionals evolve? I firmly believe that a company must grow as fast as its market to survive in the long term. Since the rate of change in the markets is going up continuously, innovation and growth must be everyone's job, not just that of a select few.
Let me address this using an example. Today a transportation leader is rewarded for securing the right contractual rates, managing drivers for safety and compliance, and executing on time and within budget. In a world of autonomous vehicles, there is no driver to manage, and the job of the transport leader is to ensure and build the right algorithms, manage the integrity of assets, and ensure good customer interactions. Because so much must change, being ahead of it is critical.
My experience has made me a firm believer in the ability of logistics to drive revenue and create new business models. Logistics can drive customer intimacy, operational excellence, and product leadership. Autonomous vehicles, for instance, will improve efficiency, but there are numerous ways they can be a source of revenue. Those that carry passengers can be mobile kiosks, making sales to passengers. And while they are carrying passengers, the trunks can be carrying packages for delivery.
Supply chain leaders need to be alert to these opportunities and be able to capitalize upon them. To do that, they must think as businesspeople—more like a general manager and less like a transaction-focused logistics manager.
Container imports at U.S. ports are seeing another busy month as retailers and manufacturers hustle to get their orders into the country ahead of a potential labor strike that could stop operations at East Coast and Gulf Coast ports as soon as October 1.
Less than two weeks from now, the existing contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance covering East and Gulf Coast ports is set to expire. With negotiations hung up on issues like wages and automation, the ILA has threatened to put its 85,000 members on strike if a new contract is not reached by then, prompting business groups like the National Retail Federation (NRF) to call for both sides to reach an agreement.
But until such an agreement is reached, importers are playing it safe and accelerating their plans. “Import levels are being impacted by concerns about the potential East and Gulf Coast port strike,” Hackett Associates Founder Ben Hackett said in a release. “This has caused some cargo owners to bring forward shipments, bumping up June-through-September imports. In addition, some importers are weighing the decision to bring forward some goods, particularly from China, that could be impacted by rising tariffs following the election.”
The stakes are high, since a potential strike would come at a sensitive time when businesses are already facing other global supply chain disruptions, according to FourKites’ Mike DeAngelis, senior director of international solutions. “We're facing a perfect storm — with the Red Sea disruptions preventing normal access to the Suez Canal and the Panama Canal’s still-reduced capacity, an ILA strike would effectively choke off major arteries of global trade,” DeAngelis said in a statement.
Although West Coast and Canadian ports would see a surge in traffic if the strike occurs, they cannot absorb all the volume from the East and Gulf Coast ports. And the influx of freight there could cause weeks, if not months-long backlogs, even after the strikes end, reshaping shipping patterns well into 2025, DeAngelis said.
With an eye on those consequences, importers are also looking at more creative contingency plans, such as turning to air freight, west coast ports, or intermodal combinations of rail and truck modes, according to less than truckload (LTL) carrier Averitt Express.
“While some importers and exporters have already rerouted shipments to West Coast ports or delayed shipping altogether, there are still significant volumes of cargo en route to the East and Gulf Coast ports that cannot be rerouted. Unfortunately, once cargo is on a vessel, it becomes virtually impossible to change its destination, leaving shippers with limited options for those shipments,” Averitt said in a release.
However, one silver lining for coping with a potential strike is that prevailing global supply chain turbulence has already prompted many U.S. companies to stock up for bad weather, said Christian Roeloffs, co-founder and CEO of Container xChange.
"While the threat of strikes looms large, it’s important to note that U.S. inventories are currently strong due to the pulling forward of orders earlier this year to avoid existing disruptions. This stockpile will act as an essential buffer, mitigating the risk of container rates spiking dramatically due to the strikes,” Roeloffs said.
In addition, forecasts for a fairly modest winter peak shopping season could take the edge off the impact of a strike. “With no significant signs of peak season demand strengthening, these strikes might not have as intense an impact as historically seen. However, the overall impact will largely depend on the duration of the strikes, with prolonged disruptions having the potential to intensify the implications for supply chains, leading to more pronounced bottlenecks and greater challenges in container availability, " he said.
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
By the numbers, overall retail sales in August were up 0.1% seasonally adjusted month over month and up 2.1% unadjusted year over year. That compared with increases of 1.1% month over month and 2.9% year over year in July.
August’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.3% seasonally adjusted month over month and up 3.3% unadjusted year over year. Core retail sales were up 3.4% year over year for the first eight months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
“These numbers show the continued resiliency of the American consumer,” NRF Chief Economist Jack Kleinhenz said in a release. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling. Households have the underpinnings to spend as recent wage gains have outpaced inflation even though payroll growth saw a slowdown in July and August. Easing inflation is providing added spending capacity to cost-weary shoppers and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
A new survey finds a disconnect in organizations’ approach to maintenance, repair, and operations (MRO), as specialists call for greater focus than executives are providing, according to a report from Verusen, a provider of inventory optimization software.
Nearly three-quarters (71%) of the 250 procurement and operations leaders surveyed think MRO procurement/operations should be treated as a strategic initiative for continuous improvement and a potential innovation source. However, just over half (58%) of respondents note that MRO procurement/operations are treated as strategic organizational initiatives.
That result comes from “Future Strategies for MRO Inventory Optimization,” a survey produced by Atlanta-based Verusen along with WBR Insights and ProcureCon MRO.
Balancing MRO working capital and risk has become increasingly important as large asset-intensive industries such as oil and gas, mining, energy and utilities, resources, and heavy manufacturing seek solutions to optimize their MRO inventories, spend, and risk with deeper intelligence. Roughly half of organizations need to take a risk-based approach, as the survey found that 46% of organizations do not include asset criticality (spare parts deemed the most critical to continuous operations) in their materials planning process.
“Rather than merely seeing the MRO function as a necessary project or cost, businesses now see it as a mission-critical deliverable, and companies are more apt to explore new methods and technologies, including AI, to enhance this capability and drive innovation,” Scott Matthews, CEO of Verusen, said in a release. “This is because improving MRO, while addressing asset criticality, delivers tangible results by removing risk and expense from procurement initiatives.”
Survey respondents expressed specific challenges with product data inconsistencies and inaccuracies from different systems and sources. A lack of standardized data formats and incomplete information hampers efficient inventory management. The problem is further compounded by the complexity of integrating legacy systems with modern data management, leading to fragmented/siloed data. Centralizing inventory management and optimizing procurement without standardized product data is especially challenging.
In fact, only 39% of survey respondents report full data uniformity across all materials, and many respondents do not regularly review asset criticality, which adds to the challenges.